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National Semi sings at Comdex
November 15, 2000: 10:27 p.m. ET

Chip maker ushers in 'information appliance' era with much fanfare
By Staff Writer Richard Richtmyer
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LAS VEGAS (CNNfn) - National Semiconductor Corp. is front and center at the Comdex technology convention taking place here this week, showcasing a slew of "information appliances" powered by its Geode line of chips.

At National's booth, located at the main entrance to the convention center, Comdex goers are greeted by performers ringing in the Internet appliance age, dancing and singing songs such as "Take Those PCs Away," done to the tune of the Beach Boys' hit "Fun, Fun, Fun."

For National, this year's Comdex event is a validation of the course it set about four years ago when Brian Halla took over as the Santa Clara, Calif.-based company's chief executive.

Since he took the helm at National, Halla has been heralding the coming of an information appliance revolution and steering the company in that direction. Information appliance is the term used to describe a computing device designed specifically for interactive information access functions such as Web pads and Internet access terminals.

As part of its bid to tap in to the growing market, National in 1997 acquired Cyrix Corp., a supplier of PC microprocessors. Although the Cyrix buy turned out to be costly for National, putting them squarely in the cut-throat PC processor market, it also provided the company with the basis for the Geode chips that are powering dozens of the information appliances on display at this year's Comdex.

National (NSM: Research, Estimates), which has its roots as a supplier of pure analog integrated circuits, sold off the Cyrix business in August 1999, but kept the rights to its Media GX microprocessor design, around which the Geode chips are built.

The Geode chips integrate the functions previously handled by several chips onto a single piece of silicon. The so-called "system-on-a-chip" solution makes it easier for manufacturers to design their products and helps reduce the overall production costs.

Of course, National has demonstrated information appliances at Comdex in previous years, and, as have many other semiconductor suppliers, it has touted the system-on-a-chip idea for quite some time. But the products they showed before were prototypes used to show what could be.

This year, it's all about what is.

graphicWhile some of the products on display at National's booth still are not available, several others already have begun shipping. These include Honeywell's WebPAD, Compaq's iPaq Internet appliance, and 3Com's "Audrey" Internet access device.

National also demonstrated working Geode-based Internet access devices and set-top boxes from companies IBM, Samsung, and ViewSonic, although most of them still have not hit the market.

The company also unveiled a new Web pad it designed in conjunction with wireless service provider Metricom. Called the WebPAD Metro, the new device measures 8" by 10" and delivers wireless Internet data at 128 kilobytes per second.

To Be or not to Be?

Most industry analysts agree that the market for information appliances will grow substantially over the next several years. Technology research firm International Data Corp. expects U.S. information-appliance unit shipments to outnumber PCs by 2002 and sees total units reaching 89 million by 2004.

Because information appliances are designed for specific tasks, the underlying operating system is not as important to the user as it is in a personal computer, which needs to be able to support a range of applications.

Most of the devices on display at Comdex were running a version of Microsoft's CE operating system, originally designed for handheld computers. But the growing market opportunity has drawn the attention of Be Inc. (BEOS: Research, Estimates)

The Menlo Park, Calif., company has had very limited success with its BeOS, a consumer desktop operating system optimized for digital media applications. For the nine months ended September 30, Be's revenue fell 71 percent to $464,000, which executives attributed to sliding sales of the BeOS,

graphicHowever, the company recently shifted its strategy in an effort to lock on to the market for information appliances, introducing an operating system designed specifically for them last February.

Although it did not garner as much attention as National, Be quietly pitched its product in a more modest booth on the convention floor. The company has taken the best elements of its desktop operating system and modified them to meet the needs of Web applications, according to Be development engineer George Wong.

The company's information appliance operating system, called BeIA, includes a comprehensive Web browser, support for popular streaming media formats, application support and remote device management, Wong said.

The company already has partnered with Compaq, which is expected to begin offering the BeIA operating system with its iPaq machines within the next six months.

It also is targeting BeIA at specific market niches such as hotels which will be able to customize and manage networks of Be-based information appliances to meet their specific needs with a new set of tools called BeIA Management and Administration Platform, or MAP, which the company introduced at Comdex.

"A complete Internet appliance solution not only requires the client software that powers the device, but also requires the remote management capabilities of MAP," said Jean-Louis Gassťe, Be's chairman and chief executive. "The remote management and administration of devices, without end user involvement, is a clear point of differentiation between appliances and computers."

Be shares ended Wednesday's session 9 cents lower at $2.78. At that level, they stood nearly 93 percent below their 12-month high of $39.56. National shares finished at $23.37, up $2.12 from Tuesday's close of $21.25 and 72.8 percent below their 12-month high of $85.93. Back to top